9911796707
TMI Blog1996 (5) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,20,00,000/- (Rupees one crore twenty lakhs only) on M/s. ITC Ltd., Bangalore under Rule 209 of Central Excise Rules, 1944." 2. The facts of the case in brief, are that the appellants herein are engaged in the manufacture of cigarettes. They were manufacturing among others cigarettes marked NOW FTK 20s . The surface design of NOW FTK 20s brand was approved by the Director of Audit on 25-11-1985. The first clearance of the product was started on 4-12-1985. During the course of inspection of cigarettes packets, it was found that there was variation in the surface design/colour of some of the packets used for packing NOW FTK from the colour of the cigarettes approved by the Director of Audit. A sample check was conducted on 5th, 6th and 8th September, 1986 to ascertain the extent of variation. On the basis of this check, it was found that 1.6% on an average of the total number of packets produced widely varied in colour/design from the approved ones. It was also noticed that the appellants had cleared 6,54,78,365 nos. of packets of NOW FTK 20s during the period from December 1985 to 6th September, 1986. Working out the number of packets on the basis of 1.6% average, it appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the present proceedings with a fresh show-cause notice on the same subject with the same set of facts is a fresh proceeding; that Rule 9(2) and Section 11A cannot both be applied to the facts of the same case; that Rule 9(1) will be applicable only in clandestine removal of goods with an intent to evade payment of duty; that Section 11A would apply to cases of short-levy; that if the case of the Department was that there had been clandestine removal, the proceedings should have been continued under Rule 9(2) initiated by the Asstt. Collector; that if the demand was only for differential duty alleged to have been short-levied or short-paid, the question of contravention of any of the Rules cannot arise; that the goods in their case were cleared under Rule 52 after the assessment by the proper officer and after payment of the required amount of duty, the question of violation of any Rules cannot and does not arise; that the findings of the Collector that the variation of surface design/colour of packets existed and the appellant was aware of it is erroneous and totally unsupported by evidence; that the communication from the Asstt. Collector dated 22-9-1986 and the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciency in the printing technology; that when a show-cause notice was issued by the Asstt. Collector, during the personal hearing before the Asstt. Collector on 9-12-1986, the appellants were shown the approved surface design and the specimen sheet of the same brand with variation in colour-cum surface design; that the appellants had seen the specimen design and had admitted the variation in colour and attributed to the state of printing technology; that there was variation in the surface design was further supported by the fact that immediately when sample check was conducted, the appellants went for approval of the changed `surface design to the Director (Audit) with effect from 8-9-1986; that if there was no change in the surface design there would have been no necessity of fresh approval by the Director of Audit; that the question of seizure was not very relevant; that the seizure was a procedural matter; that the allegation was made on factual basis and not on presumption. 5. On the quantum of duty, the learned SDR submitted that the number of packets of cigarettes manufactured was computed from the statutory register and the number of packets which varied in colour/surface ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his finding at one point has observed that there were additional words inscribed on the surface design and there was some variation in colour. He further supported this fact by saying that immediately after the sample check, the appellants have applied for approval of surface design in respect of this brand of cigarettes. We find that the appellants applied for approval of the surface design in respect of this brand immediately on 8th September, 1986. This clearly shows that there was a sample check and there was some variation. Now on the question whether the average worked out on the basis of sample check could be used for calculating the total number of packets cleared, we find that there is no evidence on record to show when the variation in colour/design actually took place. The fact remains that packets of cigarettes on which variation was detected on surface design were being printed from time to time in different lots. The Department has neither selected a particular lot nor they have brought any evidence on record to show that the variation actually took place right from the date of production of this particular brand of cigarettes. It is well settled principle of law th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation in shade was not noticed by the Excise Authorities and therefore, on behalf of the appellants, it was pleaded that there was no wide variation in shade either existing or noticed by the officers. We would like to mention here that no doubt physical control and frequent checks are required to be conducted by the Departmental Officers; that does not mean that the assessees are absolved of their responsibility on any account and therefore, we are not prepared to accept the contention of the appellants that in view of the physical control exercised by the Departmental Officers, there cannot be any allegation of wide variation in shade of the approved surface design. 10. On the question of entitlement of exemption under Notification 201/85, we find that this is a conditional notification. The concession under this notification is available only if the conditions are complied with. One of the conditions was the approval of surface design. We find that the learned Collector had held that the words `quality product were added. We also find that immediately after sample check was conducted by the Excise Authorities, the appellants submitted a proposal to the Director of Audit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osable. However, the quantum of penalty has to be proportionate to the gravity of the offence. Having regard to this view, we reduce the penalty to Rs. 1,00,000/- (one lakh). 13. On the question of extension of time beyond six months for the demand of duty, we find that there was variation in surface design, noticed during the course of sample checks undertaken on 5th, 6th and 8th September, 1986 and this change was neither reported to the department nor fresh approval sought from the competent authority before 8-9-1986 we hold that there was suppression in respect of cigarettes sorted out on 5th and 6th September, 1986 and therefore, the extended period beyond 6 months shall be applicable only to these cigarettes and not to other clearances prior to 5-9-1986. 14. Having regard to the above discussions, we hold as under : (a) Duty shall be chargeable at tariff rate on the cigarettes found packed in packets whose surface design did not conform to the approved surface design and segregated on 5th and 6th September, 1986, (b) The quantum of penalty is reduced to Rs. 1.0 lac (one lac), (c) The appellants shall be eligible to benefit of concessional rate of duty under Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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